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During the tech boom of the late 1990s, dot-com value stocks were about as abundant as homeless millionaires. Today, Internet shares are raging once again, and valuations look frothy among companies with slim profits and high hopes. But this time around, there are also bargains to be found among online old-timers whose profits are well established, and even growing nicely.

Ebay is best known for its online-auction site, which has long benefited from what business schools call the network effect. That makes some services more valuable as more people use them, giving big players key competitive advantages. To unload a gently used iPhone, it helps to list it where it will attract the most bids, even if other venues have lower fees. Today, however, eBay is arguably more of an aspiring Amazon than auctioneer, thanks to a transformation engineered by John Donahoe, who took over as CEO in the dark days of 2008 ("The Silicon Valley Outsider," Oct. 7). About 70% of transactions come from buyers clicking its Buy It Now buttons.

...but investors, enamored of Twitter and Facebook, have yet to give this "old" Internet stock its due.

It's adding Amazon-like capabilities, including free shipping and same-day delivery in some markets. And it offers one key advantage over Amazon for sellers: eBay doesn't stock and sell its own merchandise, so it doesn't compete with its third-party sellers.

IN THE NEAR TERM, eBay stands to benefit from some old-fashioned Christmas desperation for hot gifts. Susquehanna performed a recent survey of 239 items, including all three major videogame consoles, LeapPad tablets for kids, and something called Furby Boom Waves. It found a 28% out-of-stock rate across all retailers, up from 2% to 3% in recent weeks, with even higher rates at Target, Wal-Mart, and Amazon, excluding its third-party sellers. Of course, eBay's helpful capitalists had pretty much everything in stock and ready for shipment—for a price.

The Bottom Line

With PayPal driving earnings, eBay stock is likely worth 20% more than its current price.

Longer-term, eBay shares can outperform even without blazing growth. For example, Robert Peck, an analyst with SunTrust Robinson Humphrey, thinks the goals eBay laid out earlier this year look too aggressive. He expects revenues to reach $21.2 billion by 2015, up from $14.1 billion last year, compared with eBay's goal of $21.5 billion to $23.5 billion. He says eBay should dial down its numbers to set up easier comparisons, but he nonetheless upgraded the stock to Buy from Neutral earlier this month, because its recent underperformance has left the potential rewards outweighing the risks. Cantor Fitzgerald recently called eBay its top Internet value play for 2014.

"Value" here is relative. Ebay shares sell for 19 times this year's earnings forecast, versus 16 times for the Standard & Poor's 500 index. But eBay's midteens earnings-growth rate dwarfs the 4% rate last quarter for the S&P. It also sits on net cash of about $6 billion, equal to 9% of its stock market value, and should generate $4 billion in free cash next year. Based on 2015 projections, the company trades at 14 times earnings and just 13 times free cash flow. There might be a dot-com bubble brewing elsewhere, but this stock looks like a good deal.